McCay proposes income, corporate tax cuts

A state lawmaker’s “natural aversion to tax hikes” brings us HB355, which would lower the state’s personal and corporate income tax rates slightly to offset new tax revenue flowing into state coffers from the federal government’s recent tax reform/cuts.

Rep. Dan McCay, R-Riverton, is reportedly considering a run for the U.S. Senate this year. (His official comment on that race is “no comment.”)

But beside that chance, McCay says it is wrong for state government to take a tax windfall from the GOP Congress and President Donald Trump.

While numbers will be firmed up later in this legislative session, for now it’s estimated that federal tax reforms will bring the state between $75 million and $100 million more.

McCay settled on $80 million, and says lowering the personal income and corporate tax rates from 5 percent to 4.925 percent should bring in around $80 million less to state coffers.

Much of that estimated federal tax windfall comes in the federal reform’s $10,000 cap on state and local taxes one may deduct on federal forms.

For those Utahns who annually pay more than $10,000 in state and local taxes – admittedly, those with high incomes – without action in this Legislature they will pay more in Utah income taxes.

While those folks would still pay more, overall Utah wouldn’t be taking more personal and corporate income taxes – so there would be a rough offset.

And at least, state government wouldn’t be benefiting from federal tax reform – and it shouldn’t, says McCay.

Of course, a rate reduction of 0.075 percentage points is not going to mean a whole lot to the average Utah taxpayer.

But large-scale tax relief is not McCay’s aim – only that state government shouldn’t get a tax windfall.

As new revenue estimates come in later in February, and further work is done on the impact of federal tax reform is updated, McCay says he may well change the size of his rate reduction to, as best as possible, reduce state tax revenue by about as much as the federal government’s reform would bring in to state government.